Beige Book finds ‘modest to moderate’ growth

WASHINGTON (MarketWatch) — The U.S. economy is continuing to grow at a “modest to moderate” pace, the Federal Reserve reported Wednesday, in an assessment that is likely to keep it continuing its loose monetary policy.

The Beige Book is a collection of anecdotes on the economy used to help the Federal Reserve prepare for its next interest rate setting meeting. The Fed has pledged to keep interest rates at near-zero levels at least until unemployment drops below 6.5%, as the central bank debates whether to scale back its $85 billion per month bond purchase plan.

Earlier, Federal Reserve Chairman Ben Bernanke said there was no preset path for asset purchases.

The Beige Book noted that while hiring held steady or increased at a measured pace, there was reluctance to add full-time workers. Some analysts suggested that the health-care law commonly called Obamacare is the force behind employer reluctance to add full-time workers. Read more on Obamacare.

The hard data seem to confirm the assessment of the Beige Book. Industrial output grew at an annualized 0.6% pace in the second quarter, and retail sales growth in June was muted.

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An AutoNation Inc. car dealership in Ft. Lauderdale

House prices, however, have seen strong growth.

Economists polled by MarketWatch expect growth of just 1.1% in the second quarter.

‘On fire’

Some other nuggets from the report:

Car sales are “on fire” in the Philadelphia region. In New York, used car dealers find it tough to sell because of the attractive financing available for new vehicles.

Some office sales fell through or stalled in Providence due to the recent spike in interest rates.

In Cleveland, there was concern over sliding steel prices, which was attributed to rising imports.

“The phone rang more often” for a Virginia banker, while a lender in Maryland reported that people were waiting to see what rates would do.

West Virginia home sales are finally starting to increase, helped by proximity to the Washington D.C. and Baltimore markets.

Late June oil and gas exploration activity increased slightly in North Dakota from the last report and was flat in Montana.

In the San Francisco district, in the Internet and digital media sectors, mergers and acquisitions activity stepped up in recent months. However, the pace of initial public offerings remained slow, and both venture capital and private equity activity were relatively weak.

This Beige Book was written by the St. Louis Fed based on information collected on or before July 8.

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